Insurance is one of those things that nobody wants until they really need it, but by then it’s too late to get. If you have liabilities or dependants and are not covered under a group plan, you probably need coverage.
Walking around uninsured is not an option for most of us, so here are some tips to save as much money as possible on your individual life and health insurance premiums:
1. Pay your premium annually, not monthly
You actually pay a higher rate for your life, disability or critical illness policies when you opt to pay monthly. Sure it’s easier to have the premium automatically withdrawn from your bank account every month but that method of payment costs 5-10% more than paying annually.
2. Work with an independent agent, rather than a captive agent
Never buy insurance from the first insurance carrier you speak to. Work with an agent who can show you quotes from various carriers. Also, don’t be afraid to get quotes from multiple agents and/or independent brokers. Work with whoever is giving you the best rates and service.
3. Ask for preferred rates
If you haven’t had serious health concerns in the past, you can ask your agent to make a note on the application to request preferred or super-preferred rates. These lower rates are given to applicants of above average health and insurability, at the discretion of the underwriter. Some companies don’t offer preferred rates on certain products so it’s a good idea to have your agent look into that first.
4. Avoid ‘no medical’ plans, unless you really need it
Taking out a Simplified Issue life insurance policy does not require a medical exam or lengthy health declaration. The entire application is a short list of questions and the insurance is approved almost instantly. Here’s the catch, Simplified Issue is very expensive compared to traditional life insurance, so it’s typically only a good fit for hard-to-insure people. Beware of insurers and agents who only sell these types of contracts. If you are healthy and insurable, go elsewhere.
5. Shop around before renewing term life insurance
You’ll need to make a decision when your term life insurance policy comes up for renewal, otherwise be prepared to pay the astronomically high renewal rates. You should cancel the policy if you no longer need it or try to reapply in the market for a new plan at a rate lower than your renewal premium. If you decide to reapply for a new policy and lower rates, start the process at least 6 months prior to your renewal. This gives the insurer adequate time to make a decision on your new application before your existing policy renews.
6. Get the best possible occupational class for disability insurance
Disability insurance rates are based on your occupational class. The riskier your job is, the higher rates you pay. Some carriers will categorize occupations differently so always check to see what class they are putting you in. Also, if you have disability insurance through a group plan, only apply for the shortfall of your allowable monthly benefit, otherwise you will be over-insured and throwing money away.
7. Look for trade association discounts
If you belong to a trade association or professional institute, check with them to see if you have access to a group plan. These plans can make sense for people who don’t have access to employer-sponsored plans. Group health plans are generally more cost effective than individual policies.
8. Look for combo home, auto and life discounts
Some insurance companies who offer home, auto and life insurance will give you a discount if you take out all three products. Double check the lowest rate for each product though, to see if it ends up being cheaper to buy from separate carriers.
9. Avoid declines
If you’ve been declined for life insurance in the past, it can be very difficult to get a new application approved. If you think you might be hard-to-insure, you need a proper strategy. Have your agent send preliminary inquiries to the carriers you are interested in, which is an anonymous request to underwriters for their most-likely decision, should you submit an application. The next step is to secure Simplified Issue life insurance. Then submit multiple applications for traditional plans to the carriers that sent back favourable preliminary inquiries. Lastly, accept the best offer and cancel the Simplified Issue policy once your new traditional policy is in force. Keep the Simplified Issue policy in force if your new applications are all declined or more expensive.
10. Lower your liabilities and risk
What’s the most powerful way to spend less money on insurance? Don’t buy so much of it. The #1 need for life insurance is to cover debts, so if you owe less, you will have a smaller life insurance need. Don’t buy homes and take loans that are bigger than what you actually need and you won’t have to buy ridiculously huge insurance policies.
About the author:
Chantal Marr is President of LSM Insurance, where she is in charge of product development. She has a B.A. from Laval University and Bachelor of Education from the University of Western Ontario. Chantal is a member of the Independent Financial Brokers of Canada, which gives her the flexibility to deal with all major insurance companies. She is fluent in both English and French.